Graduate earnings and loan forecasts

Two ends of the student finance system on one day.

David Kernohan is Deputy Editor of Wonkhe

This morning’s Department for Education release of 2022-23 student loan forecasts for England, and the 2022 Graduate Labour Market Statistics (again England only), is coincidental rather than planned – there’s no “official” read-across between the two.

The former will mostly be read – and cited – as evidence that the government knows only too well what a bad deal plan 5 loans are for students. For the 2022-23 academic year, 27 per cent of new students are expected to repay their loan in full. For the cohort starting in September, this will rise to 61 per cent.

Part of this is because students are borrowing more money – the average for 2022-23 is £42,100 but by 2027-28 this is projected to rise to £46,830. This figure is all the more startling given that headline fee limits will not rise at all during this period, and maintenance loan availability will shift – at best – a fair way behind inflation. And loan eligibility will not shift at all.

The thing that is making the biggest difference when it comes to repayments is the extension of the repayment period from 30 years (meaning someone who graduates aged 21 will have their loan balance written off aged 51) to 40 years (pushing the write off date back to when our graduate is aged 61). And as the data shows us, the main graduate benefit of Plan 5 is to lower the overpayment in the top three deciles of graduate earners – indeed, the top decile of earners will repay £13,700 less under the new system.

Shifting to new data on annual real-terms median salaries (indexed to 2007 values) the annual graduate premium (based on main full-time jobs only) averages out at £8,000 for 2022 – and that’s been stable (with fluctuations happening only because of salary changes among non-graduates since around 2014 . As a median, we need to be clear that this means there are as many data points below this value as above it.

The upshot here is that the government is taking more funds out of a dwindling graduate income, and intends to take substantially more from lower earnings deciles in future. It’s like the diametric opposite of a progressive scheme.

3 responses to “Graduate earnings and loan forecasts

  1. One interesting implication of the student loan forecasts is that the introduction of Plan 5 doesn’t actually appear to save any money.

    The average lifetime repayments of the 2022/23 cohort – which is the final Plan 2 cohort – is £24,700 in real terms.

    The average lifetime repayments of the 2023/24 cohort – which is the first Plan 5 cohort – is £24,300 in real terms.

    The estimated RAB charge is also identical for both cohorts.

    1. I note that £8,000 in 2014 is roughly equivalent to £10,500 today. So it’s not a hugely inspiring picture for the graduate premium, either.

      1. The figures are all in real terms (adjusted using CPIH) so the graduate premium appears to have broadly constant

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